“The quote my LP is giving me has a much different bid and ask than your quote, maybe I should short the pair and hope to make up some lost margin if the market goes on a bear trend towards your quote.” This type of conversation goes on daily, probably not in your living room. It’s happening somewhere. Knowing the jargon of the trading world, and even more so, the specific security you're trading, will help you understand exactly what's happening and how it affects what you're doing in the markets. Trader on the Street is one of the best ways to quickly pick up on different jargon terms and how to appropriately use them. They go through live trading discussions and discuss what they mean.
As we've mentioned before, capital is the life blood of your trading account. The Forex account types you trade will affect how you first protect, and then grow that capital. A trader wishing to open a new account can generally choose between 3 types of Forex accounts: Standard, Mini, and Micro (Nano). These accounts differ in provided leverage, and, depending on the broker, different minimum deposits required to open that account.
Traders new to the world of foreign exchange often don’t understand the very tool that makes their trading possible: Leverage. The concept of leverage is what makes the markets accessible to new traders with little funds!
Do shifting spreads keep you guessing?
The trading term "swap" is a sort of vague for both new and experienced traders. You might have noticed it listed on your trade history before, and depending on your trading style it may or may not have affected you. In any case, it's always nice to be able to understand and use a new concept/term.
So what is swap?
The short answer is the difference between interest rates.
When you borrow money, you pay interest; when you deposit money, you earn interest. When trading forex, you’re constantly doing both. (for Apiary Traders: view module Lots and Leverage). However, the interest rates being charged or paid out is different for each bank, and each country sets their own rates. Every day at 0:00 GMT, the interest is calculated and the total is either added or deducted. This is called “Swap,” or the amount you make or spend due to a difference in interest rates.
One of the most common terms you'll hear as a forex trader is the term "pip." However, sometimes we might use and understand the word with out being able to define it. Now, you could go to lunch with your trading buddy and discuss pips, trend, and breakouts...but what happens when you're asked to explain what pip stands for?
Don’t worry. We’ve got your back! Read below to find out all about pips.